Delhi High Court has addressed the issue of whether an arbitration in which the awards were passed constituted an international commercial arbitration (ICA), which would limit the grounds for judicial review as compared to domestic arbitration. The development came from the case of Suresh Shah v Tata Consultancy Services Limited (TCS), which included legal questions surrounding two arbitration awards dated 16 December 2016 and 14 January 2017.
Background
The present case was filed with the pivotal question of whether the arbitration conducted between the parties qualified as an ICA.
It was argued that Suresh Shah’s status as a non-resident Indian with permanent residence in Kenya established the international nature of the arbitration. Evidence with respect to this was also presented. Conversely, TCS contended that there was no explicit reference to ICA in their contractual agreements and that the procedure to appoint an arbitrator as per ICA rules was not followed, suggesting that both parties had implicitly agreed to domestic arbitration procedures.
Key legal issues
In its decision the court clarified:
(1) Derogability of section 2 of the Arbitration Act. The court highlighted that while the principle of party autonomy is fundamental to arbitration, allowing parties to modify certain procedural aspects of their agreements, some provisions are non-derogable and form part of the basic structure of arbitration law.
The court noted that the parties cannot unilaterally agree to classify an arbitration as domestic when it meets the criteria for an ICA. This distinction is critical because it determines the scope of judicial review available, as challenges to ICA awards are limited compared to domestic awards.
The court referred to (2002) and (2024) to support its position that derogation from statutory definitions cannot be made by mere consent of the parties. Ultimately, the court concluded that since Suresh Shah’s arbitration was indeed an ICA, it must be evaluated under the stricter parameters set by section 34 (2A) of the Arbitration Act.
(2) Difference between an ICA and a foreign award. The court said that an ICA pertains specifically to arbitration involving parties from different countries, which inherently invokes international legal standards and principles. In contrast, a foreign award refers to an arbitral decision made in a jurisdiction outside India, which may or may not involve an ICA.
Conclusion
One significant consequence is that parties may be deterred from raising jurisdictional issues post-award unless they are addressed upfront during arbitration proceedings. This could lead to a more rigid interpretation of arbitration agreements with limited recourse for parties who later discover grounds for challenging awards on the basis of jurisdictional concerns.
This order highlights the importance of clarity in contractual agreements as well as ensuring compliance with the separate provisions/procedures regarding an ICA and a domestic arbitration.
The dispute digest is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi & Mumbai. The authors can be contacted at support@numenlaw.com. Readers should not act on the basis of this information without seeking professional legal advice.
